What causes poverty?

Poverty is a complex phenomenon. It is caused by a range of factors which work together and result in inadequate resources.

Low paid work

Even when people do work this is not always a route out of poverty. In 2009/10, 58 per cent of families below the UK poverty line contained at least one working member.

Low wages, part-time work and the high costs of childcare all conspire to reduce incomes.

Many low wage jobs offer no prospect of progression (‘low pay, low prospects’); others are insecure, providing only sporadic and unpredictable incomes (‘low pay, no pay’). As a result, they are often nothing more than poverty traps.

Worklessness

This is a major cause of poverty. In 2009/10, 42 per cent of all families below the UK poverty line contained no working members.1

There are numerous reasons people do not work. Some of these reasons are personal: many people have caring responsibilities, others suffer from a health condition or have a disability while some encounter discrimination that acts as a barrier to work.

But there are also structural reasons why people do not work. For example, if the labour market does not provide enough jobs that match the skills and qualifications of unemployed people, or that are close enough to people’s homes, working is not a realistic option.

Inadequate benefits

In the UK, when people are out of work or earn insufficient amounts of money we expect the benefits and tax credit system to act as a safety net. In reality, however, benefits are set at levels that invariably leave recipients living below the poverty line.

In 2009/10, for example, we estimate that a family with one child claiming jobseeker's allowance received only 65 per cent of the amount they required to live above the poverty line.2

1. Households Below Average Income, An analysis of the income distribution 1994/95 – 2009/10, Tables 4.3db. Department for Work and Pensions, 2011

2. Households Below Average Income, An analysis of the income distribution 1994/95 – 2009/10, Tables 4.3db. Department for Work and Pensions, 2011